Remember that great American argument about a so-called healthcare public option? The president lost out to the insurance industry, and his reforms ended up regulating private players as opposed to creating a state-run competitor to challenge them into raising their game. There are parallels with a rumbling under-the-radar row about British pensions.

Adair Turner's pensions commission accomplished something routinely proposed but rarely accomplished – a true cross-party consensus. The ingredients were later retirement, higher state benefits, and – just as important – an overhaul of personal saving to make it pay for everyone to invest for old age. The eye-catching change here was to set laziness to work, by enrolling every worker who does not actively opt out into an account that their employer is also forced to chip into. With the numbers in workplace pensions at a 50-year low, this change – which will soon be phased-in – is overdue. But Lord Turner did not want to strong-arm cash-strapped people towards pension pots rendered leaky by high charges. To stretch small savings into decent pensions, he thus proposed a new not-for-profit outfit to collect and manage the money at a fraction of traditional costs.

Happily, and unlike in Obamacare, the "public option" has come to being, and the body known by the acronym Nest held its inaugural research forum yesterday. Arms-length from Whitehall, and pitted against all-comers in an avowedly competitive private market, this is a world away from an old-style nationalised industry. Insurance firms are already offering somewhat lower charges to target savers, and anyone burnt by past mis-selling is surely grateful for the new choice. So what, you might ask, is not to like? Quite a bit, for a pension giant. A cut-price, no-nonsense default provider is also inconvenient for any advisers who reap exorbitant fees to navigate hapless punters through the grim choice between overpriced plans. This lobby cowed first Labour and now the coalition to tie up Nest in restrictions which Adam Smith might have called a conspiracy against the public.

For a start, Nest is barred from accepting any contribution of over £4,400 a year, a stricture designed to keep it out of the action in the higher end of market, which is the industry's chief interest. But for older workers who start saving late this may not be enough, and younger employees will also have to enlist in a second scheme if they go on to get a big pay rise. The dead hand of this regulation will force firms to run separate schemes for management. And while Nest eggs will often be portable to new jobs in future, there is a separate bar on transferring pre-existing plans into them. Those whose past jobs have chopped and changed will be condemned to keep up the admin on several schemes, a headache which makes planning for retirement harder.

This cuts against the core principle of the wider reform, which is making saving so brain-numbingly simple that it is easier to do it than not. That approach has to be right, seeing as the evidence summed up at yesterday's conference by the American scholar Michael Sherraden demonstrated that "by and large human beings are not very good at this financial stuff". Aside, of course, from the minority that has a talent for cleaning up.

The pensions minister, Steve Webb, who is emerging as one of the Lib Dems' ablest performers, implicitly conceded the case for change when he said that the aim must be for every individual to build up all their savings into a single "big fat pot". Quite right, but what is the government going to do? There are supposed concerns about European state aid rules but the industry is likely hyping these up. One cannot imagine the French being held back by such fears – the government should put savers first, and wait to see how the European court responds. With the crisis and the payments protection insurance scandals combining to leave the financial services sector mistrusted as never before, there has never been a more opportune moment for calling the industry's bluff.